Stocks head to mixed open, bonds down on tax plan

NEW YORK – The compromise backed by President Barack Obama and Republican leaders on extending tax cuts for two years is setting up a rocky start Wednesday on Wall Street.

Investors expect the tax-cut deal to boost economic growth but also widen the budget deficit.

Treasury prices are dropping in early Wednesday trading, sending their yields higher for a second straight day. The yield on the 10-year Treasury note rose to 3.18 percent, the highest level since June.

That means higher borrowing costs for the U.S. government when the Treasury auctions off $21 billion in 10-year notes later Wednesday.

Stocks appeared headed to a mixed opening.

Ahead of the opening bell, Dow Jones industrial futures are down 6 points, or 0.05 percent, to 11,349. S&P 500 index futures are up 0.7, or 0.06 percent, to 1,224. Nasdaq 100 futures are up 4, or 0.2, to 2,194.

The deal which would also extend jobless benefits had sent stock prices higher for much of Tuesday, but the rally faded by late afternoon. The Standard & Poor's 500 index closed within two points of this year's high hit Nov. 5.

Treasury bonds, however, were crushed, turning in one of their worst days this year. The yield on the benchmark 10-year Treasury note jumped to 3.13 percent from 2.93 percent late Monday.

The dollar is up 0.5 percent on Wednesday against an index of six other currencies.

In corporate news, Costco Wholesale Corp. reported its fiscal first quarter profit jumped 17 percent with higher revenue from membership fees and international stores. The earnings beat analysts' forecasts of 69 cents per share, according to a survey by Thomson Reuters.

Home Depot Inc. lifted its earnings guidance for the second time in two months. The retailer now expects net income from continuing operations to be $1.97 per share in fiscal 2010, up from prior guidance of $1.94 per share.

Meanwhile, Fortune Brands Inc. said it plans to split into three separate companies, keeping its liquor business led by Jim Beam bourbon while shedding the businesses that make Titleist golf balls, Moen faucets and Master Locks.